Twitter Inc: Why TWTR Stock Tanked Thursday

twtr stockWill Twitter Get Acquired in 2016?

Twitter Inc (NYSE:TWTR) stock tumbled about 20% on Thursday to close the trading session at $19.87.

Earlier on Wednesday, the shares had jumped over five percent on the back of favorable comments made by Salesforce.com Inc’s (NYSE:CRM) CEO Marc Benioff. It was also reported that the acquisition deal could close sooner rather than later. As the speculation continues, there does not seem to be an end to the wild swings in TWTR stock.

So what happened yesterday?

The media reported that neither Alphabet Inc (NASDAQ:GOOG) nor Walt Disney Co (NYSE:DIS) may bid for the social media company. Apple Inc. (NASDAQ:AAPL) may also not be interested in acquiring Twitter. (Source: “Google and Disney won’t be bidding on Twitter,” Recode, October 6, 2016.)

The concern now is that, with major suitors reportedly out of race, who will be willing to acquire Twitter, and at what price?

The next two big names left are Salesforce.com Inc and Microsoft Corporation (NASDAQ:MSFT). The data asset of Twitter could be valuable to either company, both of which are big cloud players. However, Microsoft just acquired LinkedIn Corp (NYSE:LNKD) in June, and it is unlikely that the company would want to go forward with another huge deal without closing the earlier one.  

Salesforce.com Inc does not have deep pockets like other players. Monness, Crespi, Hardt & Co. Inc. analyst James Cakmak is not sure if a Salesforce acquisition makes sense, or if the company can even afford Twitter. He says that if Salesforce.com is the only potential bidder, then Twitter may remain independent until a more reasonable valuation is available. (Source: “Here’s how deep Twitter’s slide could get if Google, other bidders are out,” MarketWatch, October 6, 2016.)

The TWTR stock price had hit a high of about $25.00 this week, but now it is below $20.00. It is likely that the lower valuation may attract new suitors in the ring. The only question is, would a price below the initial public offering (IPO) price of $26.00 be acceptable to Twitter management? There is a low probability of this event happening, and it is very unlikely that Twitter CEO Jack Dorsey can close the deal by October 27.  

Investors will be keeping their eyes and ears open to every piece of news flowing from the media. However, what remains important is whether any direct communication is made by the management teams of Salesforce.com, Apple, Disney, or Alphabet in the coming days. A fresh interest from a new bidder with deep pockets may send TWTR stock up again.